[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]

OFFICE OF THE U.S. INTELLECTUAL PROPERTY ENFORCEMENT COORDINATOR

=======================================================================

HEARING

BEFORE THE

SUBCOMMITTEE ON
INTELLECTUAL PROPERTY,
COMPETITION, AND THE INTERNET

OF THE

COMMITTEE ON THE JUDICIARY
HOUSE OF REPRESENTATIVES

ONE HUNDRED TWELFTH CONGRESS

FIRST SESSION

__________

MARCH 1, 2011

__________

Serial No. 112-33

__________

Printed for the use of the Committee on the Judiciary

Available via the World Wide Web: http://judiciary.house.gov

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COMMITTEE ON THE JUDICIARY

LAMAR SMITH, Texas, Chairman
F. JAMES SENSENBRENNER, Jr., JOHN CONYERS, Jr., Michigan
Wisconsin HOWARD L. BERMAN, California
HOWARD COBLE, North Carolina JERROLD NADLER, New York
ELTON GALLEGLY, California ROBERT C. ``BOBBY'' SCOTT,
BOB GOODLATTE, Virginia Virginia
DANIEL E. LUNGREN, California MELVIN L. WATT, North Carolina
STEVE CHABOT, Ohio ZOE LOFGREN, California
DARRELL E. ISSA, California SHEILA JACKSON LEE, Texas
MIKE PENCE, Indiana MAXINE WATERS, California
J. RANDY FORBES, Virginia STEVE COHEN, Tennessee
STEVE KING, Iowa HENRY C. ``HANK'' JOHNSON, Jr.,
TRENT FRANKS, Arizona Georgia
LOUIE GOHMERT, Texas PEDRO R. PIERLUISI, Puerto Rico
JIM JORDAN, Ohio MIKE QUIGLEY, Illinois
TED POE, Texas JUDY CHU, California
JASON CHAFFETZ, Utah TED DEUTCH, Florida
TOM REED, New York LINDA T. SANCHEZ, California
TIM GRIFFIN, Arkansas DEBBIE WASSERMAN SCHULTZ, Florida
TOM MARINO, Pennsylvania
TREY GOWDY, South Carolina
DENNIS ROSS, Florida
SANDY ADAMS, Florida
BEN QUAYLE, Arizona

Sean McLaughlin, Majority Chief of Staff and General Counsel
Perry Apelbaum, Minority Staff Director and Chief Counsel
------

Subcommittee on Intellectual Property, Competition, and the Internet

BOB GOODLATTE, Virginia, Chairman

HOWARD COBLE, North Carolina, Vice-Chairman

F. JAMES SENSENBRENNER, Jr., MELVIN L. WATT, North Carolina
Wisconsin JOHN CONYERS, Jr., Michigan
STEVE CHABOT, Ohio HOWARD L. BERMAN, California
DARRELL E. ISSA, California JUDY CHU, California
MIKE PENCE, Indiana TED DEUTCH, Florida
JIM JORDAN, Ohio LINDA T. SANCHEZ, California
TED POE, Texas DEBBIE WASSERMAN SCHULTZ, Florida
JASON CHAFFETZ, Utah JERROLD NADLER, New York
TOM REED, New York ZOE LOFGREN, California
TIM GRIFFIN, Arkansas SHEILA JACKSON LEE, Texas
TOM MARINO, Pennsylvania MAXINE WATERS, California
SANDY ADAMS, Florida
BEN QUAYLE, Arizona

Blaine Merritt, Chief Counsel

Stephanie Moore, Minority Counsel

C O N T E N T S

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MARCH 1, 2011

Page

OPENING STATEMENTS

The Honorable Bob Goodlatte, a Representative in Congress from
the State of Virginia, and Chairman, Subcommittee on
Intellectual Property, Competition, and the Internet........... 1
The Honorable Melvin L. Watt, a Representative in Congress from
the State of North Carolina, and Ranking Member, Subcommittee
on Intellectual Property, Competition, and the Internet........ 3
The Honorable John Conyers, Jr., a Representative in Congress
from the State of Michigan, Ranking Member, Committee on the
Judiciary, and Member, Subcommittee on Intellectual Property,
Competition, and the Internet.................................. 4
The Honorable Howard Coble, a Representative in Congress from the
State of North Carolina, and Member, Subcommittee on
Intellectual Property, Competition, and the Internet........... 4

WITNESSES

The Honorable Victoria A. Espinel, U.S. Intellectual Property
Enforcement Coordinator, Executive Office of the President
Oral Testimony................................................. 5
Prepared Statement............................................. 8

LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

Material submitted by the Honorable Howard L. Berman, a
Representative in Congress from the State of California, and
Member, Subcommittee on Intellectual Property, Competition, and
the Internet................................................... 26
Material submitted by the Honorable Debbie Wasserman Schultz, a
Representative in Congress from the State of Florida, and
Member, Subcommittee on Intellectual Property, Competition, and
the Internet................................................... 46

APPENDIX
Material Submitted for the Hearing Record

Prepared Statement of the Honorable Tom Reed, a Representative in
Congress from the State of New York, and Member, Subcommittee
on Intellectual Property, Competition, and the Internet........ 56
Response to Post-Hearing Questions from the Honorable Victoria A.
Espinel, U.S. Intellectual Property Enforcement Coordinator,
Executive Office of the President.............................. 57
Prepared Statement of the U.S. Chamber of Commerce............... 67

OFFICE OF THE U.S. INTELLECTUAL PROPERTY ENFORCEMENT COORDINATOR

----------

TUESDAY, MARCH 1, 2011

House of Representatives,
Subcommittee on Intellectual Property,
Competition, and the Internet,
Committee on the Judiciary,
Washington, DC.

The Subcommittee met, pursuant to notice, at 1:33 p.m., in
room 2141, Rayburn Office Building, the Honorable Bob Goodlatte
(Chairman of the Subcommittee) presiding.
Present: Representatives Goodlatte, Coble, Chabot, Issa,
Pence, Jordan, Chaffetz, Reed, Griffin, Marino, Adams, Quayle,
Watt, Conyers, Berman, Chu, Deutch, Sanchez, Wasserman Schultz,
Lofgren, and Jackson Lee.
Staff present: (Majority) David Whitney, Counsel; Olivia
Lee, Clerk; and Stephanie Moore, Minority Counsel.
Mr. Goodlatte. This hearing of the Subcommittee on
Intellectual Property, Competition, and the Internet will come
to order.
And I will recognize myself for an opening statement.
Companies that rely upon strong intellectual property
protection employ 18 million Americans, account for more than
50 percent of our exports, contribute 40 percent of our
economic growth, and 6 percent of our gross domestic product.
Given these numbers, it is apparent that our continued
ability to promote creativity and innovation and protect
American intellectual property lie at the center of vital U.S.
economic and national security interests.
But how serious are the challenges to U.S. IP leadership?
What should be our priorities, and what are the appropriate
roles of the public and private sectors in preserving our
competitive advantages and protecting intellectual property?
I would like to note the intelligence community's analysis
of one of the evolving threats posed by IP theft. Earlier this
month, the Director of National Intelligence stated that in our
interdependent world, economic challenges have become paramount
and cannot be underestimated, from increasing debt to
fluctuating growth, to China's economic and military rise. He
went on to say we are seeing a rise in intellectual property
theft. Industry has estimated the loss of intellectual property
worldwide to cyber crime in 2008 alone cost businesses
approximately $1 trillion.
We believe this trend has gotten worse. Last year, some of
our largest information technology companies discovered that
throughout much of 2009, they had been the targets of
systematic efforts to penetrate their networks and acquire
proprietary data. The intrusions attempted to gain access to
repositories of source code, the underlying software that
comprises the intellectual crown jewels of many of these
companies.
Similar findings were included in the intelligence
community's 2011 Annual Threat Assessment. It is clear that the
challenges faced by IP holders are serious and that protecting
intellectual property has important implications for our
Nation's economy innovation and national security.
The U.S. Government clearly has both strategic and
practical interests in ensuring our Nation's IP laws foster the
continued development of innovative and creative products here
at home. We also have obligations to ensure our laws are
administered efficiently and enforced appropriately.
In recognition of the need to elevate IP enforcement policy
on the permanent list of U.S. Government priorities, Congress
passed the Prioritizing Resources and Organization for
Intellectual Property Act of 2008, or PRO-IP, signed into law
by President George W. Bush on October 13, 2008. The effort to
enact PRO-IP was led by our then Chairman and current Chairman
and current Ranking Member, Representative John Conyers, Jr.,
and Representative Lamar Smith, respectively. The law followed
unprecedented efforts by the Bush administration to implement
new strategies to assist IP owners and improve IP enforcement
at home and abroad. These included the Strategy Targeting
Organized Piracy, or STOP, and the formation of the Department
of Justice's first intellectual property task force.
A key provision of PRO-IP is the requirement to establish
the intellectual property enforcement coordinator position, or
IPEC, in the Executive Office of the President. Congress
determined this was needed to make certain the official charge
with coordinating IP enforcement policy across all agencies had
the requisite authority and independence to transcend agency
boundaries.
In September of 2009, President Barack Obama nominated
Victoria Espinel, the former Assistant U.S. Trade
Representative for Intellectual Property and Innovation, as the
first IPEC. She was confirmed in December of 2009. Since
assuming office, Ms. Espinel has been responsible for
fulfilling the statutory duties specified in section 301(b) of
the PRO-IP.
In June of 2010, the Office of the IPEC published the
inaugural Joint Strategic Plan on Intellectual Property
Enforcement which identified 33 enforcement strategy action
items the Federal Government will take to enhance the
protection of American intellectual property rights. Several
are of specific interest to the Subcommittee. These include
efforts to combat the theft of intellectual property online and
increase information sharing between law enforcement officials
and rights holders.
In February, the office published its first annual report
on IP enforcement, and the President appointed the IPEC to
chair two new IP enforcement advisory committees. In addition,
the office reports substantial progress on developing a white
paper that will contain specific statutory recommendations for
improving Federal intellectual property laws and enforcement
efforts.
I am told one or two issues need to be finalized, but I am
hopeful the Members of the Subcommittee may receive a brief
overview of what is expected.
As you can see, we have a lot to talk about today,
especially at a time when this Subcommittee is about to
undertake hearings examining the ever-growing problem of online
piracy and rogue websites both here in the U.S. and overseas.
Ms. Espinel has assumed her duties at a historic and critical
time. Today's hearing, which represents the first formal
oversight hearing of the office for the IPEC, will examine the
work of the office since it was established in 2008. I look
forward to hearing about the progress of the office, as well as
new ideas that office has for further protecting the
intellectual property rights of America's authors and creators.
Now, I think we still have time before we need to depart
for votes, and if the gentleman is willing, I will recognize
the Ranking Member of the Subcommittee, the gentleman from
North Carolina, Mr. Watt.
Mr. Watt. Thank you, Mr. Chairman, for convening this
important hearing.
The Prioritizing Resources and Organization for
Intellectual Property Act, better known as PRO-IP Act, was
introduced by then Chairman Conyers and Ranking Member Smith in
2007. Chairman Goodlatte and I also co-sponsored the bill which
was signed into law October 13, 2008.
The PRO-IP Act followed countless studies that demonstrated
the reliance of U.S. businesses and entrepreneurs on
intellectual property rights to protect their investments,
resources, and creativity that in turn feed and grow the U.S.
economy. Patents, trademarks, and copyrights are the backbone
of many American enterprises and virtually all innovation.
However, we found that increasing theft, both within and beyond
the U.S. borders, cost American jobs and often also threatens
public health and safety.
We also recognized that there were major challenges in
coordinating Federal enforcement of existing laws in support of
intellectual property rights. Numerous agencies shared
responsibility for interdiction, investigation, and prosecution
of intellectual property offenses. To address this disjointed
system of enforcement, the PRO-IP Act created the position of
the Intellectual Property Enforcement Coordinator and required
that it be housed in the Executive Office of the President.
Today we welcome Victoria Espinel, the Intellectual
Property Enforcement Coordinator to this inaugural oversight
hearing of IPEC in the House to tell us what progress has been
made since her position was created. This will be our first
opportunity, since the President's State of the Union and
subsequent issuance of the executive order designating the
strengthened Federal efforts to encourage innovation through
vigorous enforcement of our intellectual property laws, to hear
an Administration official on the implementation of concrete
steps to ramp up our IP enforcement regime. So I look forward
to hearing from our witness and yield back the balance of my
time.
Mr. Goodlatte. I thank the gentleman.
It is my understanding that the Ranking Member of the full
Committee, the gentleman from Michigan, Mr. Conyers, also has a
statement. And I think maybe we can get that in before we
depart for votes. Does the gentleman wish to be recognized now
or when we return?
Mr. Conyers. I would prefer when we come back, Mr.
Chairman.
Mr. Goodlatte. Okay. Well, with that in mind, then I think
the Committee will stand in recess and when we return, we will
start with Mr. Conyers or Mr. Smith, if he is here. And then we
will turn to you, Ms. Espinel. Thank you for your patience.
[Recess.]
Mr. Goodlatte. The Committee will come to order, and the
Chair now recognizes the gentleman from Michigan, Mr. Conyers.
Mr. Conyers. Thank you, Chairman Goodlatte.
The only thing I wanted to add in welcoming our witness is
to, first of all, concur with the comments that I have heard
from Chairman Goodlatte and Ranking Member Watt, is the
following. This no doubt talented and charming member raises
the question for me of is she tough enough for this job. That
remains to be seen, and perhaps I can become convinced of it
this afternoon.
There is something else that I would add and then put my
statement in the record.
There are several other things that I would like to see
happen. First of all, I would think that this office requires
at least 10 full-time staff people, not detailees.
And further, I feel that the office of IPEC should be moved
to the Office of Science and Technology Policy instead of where
it is.
Finally, I commend the President for the executive order
issued several weeks ago, and I think it is an excellent step
toward combating intellectual property theft in our country and
abroad. But I think this has to be seriously addressed and not
just have an office in an organizational chart, and that is
where I hope this Committee can be effective in making this a
genuine operation.
And I welcome the witness and I yield back my time.
Mr. Goodlatte. I thank the gentleman.
And it is now my pleasure to recognize the Vice-Chairman of
the Subcommittee, the gentleman from North Carolina, Mr. Coble.
Mr. Coble. Thank you, Mr. Goodlatte. I will be very brief.
Thank you and the Ranking Member for having scheduled this
very important issue involving a very important issue.
And it is good to have you, Ms. Espinel, with us today.
Thank you, Mr. Chairman. I yield back.
Mr. Goodlatte. I thank the gentleman.
We have a very distinguished and I think pretty tough, too,
witness today. Your written statement will be entered into the
record in its entirety, and we would ask you to summarize your
testimony. To help you stay within the 5-minute time limit,
there is a timing light on your table. When the light switches
from green to yellow, you will have 1 minute to conclude your
testimony. When the light turns red, it signals your 5 minutes
have expired, but you are going to have loads of questions to
get any points you didn't make in your opening statement into
the record.
It is our custom on this Subcommittee to swear in our
witnesses. So before I introduce you, I would ask that you
stand and be sworn in.
[Witness sworn.]
Mr. Goodlatte. Thank you.
Our witness is Victoria A. Espinel, the U.S. Intellectual
Property Enforcement Coordinator for IPEC. Ms. Espinel is the
first person to serve in this important position which
Congress, through enacting the Prioritizing Resources and
Organizing for Intellectual Property Act, or PRO-IP Act,
required to be created in the Executive Office of the
President.
Ms. Espinel is well known to the Members of this Committee
through her several appearances and earlier service as the
first-ever Assistant United States Trade Representative for
Intellectual Property and Innovation in the Office of the U.S.
Trade Representative. In that capacity, she served as the
principal U.S. trade negotiator on IP and chaired the
interagency committee that conducts the annual special 301
review of international protection of IP rights.
Before confirmation as the IPEC, Ms. Espinel was a visiting
professor at the George Mason University School of Law. She
holds an L.L.M. from the London School of Economics, a J.D.
from Georgetown University, and a bachelor of science in
foreign service from Georgetown University School of Foreign
Service.
We welcome her return to the House Judiciary Committee
where in 2005 she first testified before Congress and look
forward to receiving her testimony at the first oversight
hearing that is devoted to the Office of the U.S. Intellectual
Property Enforcement Coordinator. Ms. Espinel, welcome.

TESTIMONY OF THE HONORABLE VICTORIA A. ESPINEL, U.S.
INTELLECTUAL PROPERTY ENFORCEMENT COORDINATOR, EXECUTIVE OFFICE
OF THE PRESIDENT

Ms. Espinel. Thank you very much.
Chairman Goodlatte, Ranking Member Watt, Members of the
Subcommittee, thank you for your continued leadership on
intellectual property.
As President Obama said in the State of the Union Address:
``In America, innovation doesn't just change our lives. It is
how we make a living.'' Protecting creativity and innovation
and the jobs, exports, and economic growth that they create is
what I do every day. It takes effective enforcement to ensure
that a revolutionary idea can blossom into economic opportunity
and create the high-paying jobs that will drive our prosperity
in the future.
The PRO-IP Act of 2008 created my position, the
Intellectual Property Enforcement Coordinator, and placed it
within the Executive Office of the President. Members of this
Subcommittee were instrumental in creating my position, and I
am honored to serve as the first coordinator.
To show the importance the President places on intellectual
property enforcement, 3 weeks ago he issued an executive order
establishing a cabinet-level committee, which I will chair, to
further focus the Administration's IP protection efforts.
My first order of business upon taking office was to
coordinate the development of the Administration's Joint
Strategic Plan. That strategy, which we issued in June,
resulted from significant public input and the coordinated
efforts of the Federal agencies. I want to highlight some of
the concrete steps we have taken to improve enforcement in the
8 months since we issued the strategy.
First, we will lead by example and ensure we respect
intellectual property in our policies and practices. In
January, we issued a statement setting out the Administration's
policy to be technology neutral in our procurement and that all
technology must be properly licensed. We are also reviewing our
policies on the use of software by Federal contractors.
Counterfeit products that could harm our military or our
national security are unacceptable. We are working intensely
with DOD and NASA and others on a plan to stop counterfeit
products from entering the military and critical infrastructure
supply chain and will issue recommendations later this year. I
look forward to working with you on this important issue.
Second, we will be transparent so the public knows what we
are doing and can have input. My office has met and will
continue to meet with stakeholders as we implement the
strategy.
Third, we will we will improve our coordination. We now
have 30 law enforcement teams in cities across the Nation
working with State and local law enforcement. We have
identified 17 countries where enforcement is a priority and the
embassies there have formed working groups and are drafting
concrete action plans to address the challenges in those
countries.
Fourth, we will enforce our rights overseas. In November,
USTR concluded negotiations on an enforcement agreement called
ACTA with 38 countries representing over half of global trade.
Since June, the U.S. has led and participated in three global
law enforcement sweeps against counterfeit drugs and online
piracy, each involving over 30 countries. We are working with
the agencies and industry to assess China's progress under the
enforcement campaign announced in October and to encourage more
action. And USTR just yesterday issued a report on physical and
online overseas markets that will raise awareness and aid our
diplomatic efforts.
Fifth, we will secure our supply chain. That includes
working to minimize infringing products coming into the United
States and technology being illegally transferred out of the
United States. Overall, intellectual property enforcement is
up. From 2009 to 2010, ICE investigations opened are up more
than 41 percent. DHS seizures are up more than 34 percent, and
FBI investigations opened are up more than 44 percent.
In June and July, ICE and DOJ had two of the largest
counterfeit goods cases in history, each involving over $100
million worth of counterfeit goods.
DOJ and the FBI have made trade secret cases a priority,
including two recent cases involving the theft of technology
developed by our automobile industry, one of which involve
hybrid car technology.
Securing our supply chain also means fighting infringement
in the digital world. To do so, we need increased law
enforcement, voluntary action from the private sector, and
consumer education. DOJ and ICE have launched ``Operation In
Our Sites,'' targeting websites used to distribute infringing
products. We are also working with the private sector to
encourage voluntary actions that are practical and effective,
respect privacy and fair process, and protect legitimate uses
of the Internet.
In December, we announced that a number of major Internet
intermediaries agreed to come together as leaders to form a
nonprofit to take voluntary enforcement actions against illegal
online pharmacies. By preventing criminals from gaining access
to consumers and appearing legitimate through the use of
payment processors, the purchase of ads or a registered domain
name, these companies can play a critical role in combating
illegal online pharmacies.
Voluntary cooperative solutions are a priority focus for
our office, and we believe, in combination with increased law
enforcement, voluntary actions by the private sector have the
potential to dramatically reduce online infringement and change
the enforcement paradigm. We will continue to push forward with
voluntary actions on multiple fronts.
Finally, we will build a data-driven Government to ensure
our policies are as well informed as possible. We are working
with leading economists in the Administration on the first-ever
U.S. Government economic analysis that will measure the jobs
and exports created by IP industries across our entire economy.
We are committed to help American businesses, to protect
American jobs, to increase exports, to protect health and
safety, and to ensure that innovation continues to drive our
economic growth. We know we still have much to do, and we will
continue working.
Later today, we will deliver to you a strategy to fight
counterfeit drugs, and in the near future, we will provide to
you a white paper of legislative recommendations.
I commend the Subcommittee's leadership and I look forward
to working closely with you.
[The prepared statement of Ms. Espinel follows:]

__________

Mr. Goodlatte. Thank you, Ms. Espinel.
I will start the questioning.
I mentioned in my opening remarks your work on preparing
legislative recommendations for enhancing IP protections. When
might we expect to receive those recommendations?
Ms. Espinel. I hope to have those recommendations to you
very soon. I think we are very close to completion. It is a
comprehensive set of legislative recommendations and so it has
gone through an intense interagency process which is not yet
completed, but hopefully will be very soon. And we will have
those recommendations to you as quickly as it is completed.
Mr. Goodlatte. Thank you. We will look forward to examining
those.
This Committee observed that a gap in the criminal law
discourages Federal prosecutors from pursuing cases of
unauthorized streaming of television programming over the
Internet. In fact, we conducted a hearing on related issues
just over a year ago.
What are your thoughts on whether Congress should close
this loophole by providing felony penalties in appropriate
circumstances?
Ms. Espinel. We have heard this concern about a deficiency
in our law related to illegal streaming. We have heard it from
the industry. We have heard it from law enforcement. It is
something that we are seriously considering in the context of
the white paper on legislative recommendations that I
mentioned. As I said, I hope to have that to you very soon. But
I think I am safe in saying that this is an issue of great
concern to us. I think it is critical to helping us fight the
problem of online piracy, and I hope that we have a
recommendation to you on that very soon.
Mr. Goodlatte. Thank you.
Increasingly we hear that counterfeiting and piracy
represent a national security threat. Do you agree with that,
and in what respects does piracy affect our national security?
Ms. Espinel. I do agree with that, and I am going to answer
that in two different ways: one, to tell you about an
initiative that we are already working on; and two, to tell you
about an initiative that we are just starting. I think I will
start with the latter.
There is a number of conversations that we are having with
the FBI, with NSF, with certain companies that have made clear
to us that there is a threat to our national security from
counterfeit products or from other types of IP infringement
like trade secrets being transferred overseas. So one of the
things that my office is working on right now is trying to
assess exactly what the scope of the problem that we are facing
is and then what we need to do as a Government to address it.
There is one area of this where we have already identified
a threat, and we are working intensely with DOD and NASA on how
to address that. So we have identified a problem with
counterfeit products coming into the military supply chain.
That is, as I said, completely unacceptable. We are working
very intensely with DOD, NASA, and some of the other agencies
on a plan to address that. We are also working with DOJ and the
FBI which have made this a priority issue for them in terms of
law enforcement.
There are a number of legislative recommendations that we
are considering in this area, which I hope to have to you
shortly. And in terms of the overall U.S. Government
procurement supply chain, we are working on recommendations
that I am confident that we will have to you within the year,
if not sooner.
Mr. Goodlatte. In the plan that you set out last year, you
proposed to update the executive order requiring Federal
agencies to use legal software, to also require those doing
business with the Government to do so as well. Your report said
in part, quote, to demonstrate the importance we place on the
use of legal software and to set an example to our trading
partners, the U.S. Government will review its practices and
policies to promote the use of only legal software by
contractors.
This is a great idea. What is the status of this new
executive order?
Ms. Espinel. Well, we think it is enormously important that
those who are doing business with the U.S. Government respect
intellectual property. We are also keenly aware that what the
United States does, in terms of our own policies and practices
and in terms of the contractors that work with us, can serve as
an example to other countries around the world. So this is an
issue that we care about deeply, and I hope that we are soon in
a position that we can report back to you on the steps that we
are planning to take.
But it is very good for me to know that you and this
Committee are interested in that issue, and I will certainly
convey that back to the interagency process we have where we
are discussing this.
Mr. Goodlatte. We definitely are interested. So, in other
words, an executive order has not yet been fashioned for the
President to issue.
Ms. Espinel. There had been discussion of a number of
options and updating the executive order is clearly--I think,
obviously, one of the options that we have discussed, but there
has been no decision yet as to what the President might do.
Mr. Goodlatte. Administrations from both sides of the aisle
and law enforcement agencies have routinely announced their
intention to dedicate new resources to IP enforcement,
investigations, and prosecutions. But what is meant by
``dedicated'' or ``devoted'' resources seems to be amorphous.
Have you provided any guidance to agencies to ensure that such
announcements are benchmarked and based on consistent criteria?
If not, do you think this might be a worthwhile pursuit? We
hear a lot of people talking about setting priorities, but then
we do not see a lot behind that.
Ms. Espinel. Well, hopefully you will see a lot behind that
in terms of our office. We have talked to a number of the
agencies, particularly the law enforcement agencies, about
dedicated IP personnel. I think it has been very clear in the
conversations that we have had with the agencies that when we
say dedicated IP personnel, we mean personnel that are spending
virtually all of their time on intellectual property, that that
is in fact what they are dedicated to full-time.
I can tell you that ICE, the Immigration and Customs
Enforcement, is looking at increasing the number of dedicated
IP personnel that they have. In fact, in September, they put in
place their first sort of full-time IP personnel in China. I
know that the FBI is also seriously considering putting a
dedicated IP agent in Beijing, which we think would be
enormously helpful.
Beyond that, we have also been working with DOJ on putting
more overseas personnel in place. Now, I think in the case of
DOJ, it would likely be personnel that had multiple
responsibilities, but those personnel would be hired with an IP
background and a significant amount of their responsibilities
would be devoted to intellectual property.
In terms of benchmarks, one of the things that we did last
year was, for the first time, actually canvass the agencies to
find out exactly what they were spending on IP enforcement and
where those resources were being spent. That is something that
we are planning to do again this year. So I would be happy to
report back to you on the data that we collect at the end of
that process.
Mr. Goodlatte. Thank you very much.
I now recognize the gentleman from North Carolina, Mr.
Watt.
Mr. Watt. Thank you, Mr. Chairman.
And welcome, Ms. Espinel.
Ms. Espinel. Espinel.
Mr. Watt. Great to have you here.
In December, your office announced the formation of a
private sector nonprofit involving a number of players to try
to counteract the sale of counterfeit pharmaceuticals. There
are a number of other segments other than counterfeit
pharmaceuticals, obviously, where the issue of piracy and
copyright and other counterfeits are taking place.
I am wondering whether you see a different set of issues
related to the pharmaceutical industry and the sale of
pharmaceuticals as opposed to some of these other things and
whether you are contemplating doing something similar in other
segments. And I am also wondering how this plan has progressed
to this point. So if you can kind of address both of those at
the same time, it would be great.
Ms. Espinel. I would be happy to.
The counterfeit pharmaceuticals raise health and safety
issues that also, frankly, are raised by other types of
counterfeited products, although not all types of counterfeited
products. So that is, I suppose, a difference with counterfeit
pharmaceuticals.
That said, my office is committed, as we have said many
times, to try to reduce infringement across all of our business
sectors, and it is an amazingly wide array of business sectors
that have come to us to say that they are suffering from
infringement.
In terms of online enforcement, we feel that the types of
voluntary actions that the private sector said that they would
take in the context of illegal online pharmacies could also be
very helpful in trying to reduce other types of online
infringement. So we are actively engaged in discussions with a
number of types of intermediaries, including the payment
processors or credit card companies, for example, with domain
name registrars, with Internet service providers, with ad
brokers or the companies that provide for advertising over the
Internet.
I think one of the areas that is a priority focus for us is
trying to make sure that people are not using infringement as a
way of making money and try to cut this off as a money-making
venture. So one of the things that my office is very focused on
is trying to go after the sources of money, and we feel that
working with Internet intermediaries is one of the ways that we
can help try to effectively cut this off as a business.
Mr. Watt. Have you made any progress since December when
you formed this nonprofit?
Ms. Espinel. We haven't made any progress----
Mr. Watt. Any measurable progress.
Ms. Espinel [continuing]. That I am in a position to
announce. I think we have had some discussions that are going
well, but clearly--or at least as I have tried to make clear--
we need to see more action by the private sector. While we have
had some discussions that seem to be moving in the right
direction, I think we need for those to be concluded in a
positive manner. And again, this is a very important focus for
us, so we will continue to push forward on it. And it is good
for me to know that you are also interested in it.
Mr. Watt. How many permanent staffers does your office
have? And compare that with what you believe you need, if you
would.
Ms. Espinel. So my office has me and James Schuelke, my
confidential assistant who is fabulous. Other than me and
James, the office is staffed with a number, a few, temporary
details who have been fantastic, very hard-working, very
dedicated to the mission, but they are on loan to me from other
agencies.
In terms of resources that we need, I think in this fiscal
environment, obviously, everyone is trying to make do with what
they have and to get as much out of their resources and to use
those resources as effectively as they possibly can. We will
continue to do that.
I should also note that we have had great support from the
agencies, and so that has been an enormous advantage and help
that my office has had in terms of level of commitment and
support that we have had from the agencies. We will continue to
assess our resources as we move forward.
Mr. Watt. So I assume there are some advantages to having
detailees from other agencies, but when you get people detailed
from an agency like the Patent and Trademark Office and they
have a substantial backlog, it raises questions about the
effective use of people. Can you tell us what the advantages
are of having detailees and address the concern that that might
raise about whether some of these other places need the
employees also?
Ms. Espinel. I am tempted to kick that question to my
detail from the Patent and Trademark Office.
I will just say that David Campos has been very generous in
giving the office support and sending details to the office
because I know he has a big job on his hands and likely feels
that he could use all of his staff. Tom Stoll, who has been in
the office for about a year now, but is unfortunately leaving
soon to go back to the PTO, has been an enormous asset. PTO is
sending over a detail to replace him, and I am confident that--
--
Mr. Watt. How is that efficient?
Ms. Espinel [continuing]. The detail will also be an asset.
Mr. Watt. I mean, it just seems like that would be
inefficient to keep this revolving door detailee situation
going.
Ms. Espinel. Well, I think we have accomplished a lot under
the circumstances that we face.
Mr. Watt. I understand that but we are trying to make this
operation more and more efficient too. And unless there is some
real advantage to turning the people, the detailees, I mean, I
don't know what we are gaining from that, which is why I asked
the question. I was trying to see if there were some advantages
to temporary detailees, but you haven't addressed that one.
Ms. Espinel. I think the details that have come to the
office have been great, and I think the backgrounds that they
have had--some of them have had IP backgrounds. Some of them,
frankly, haven't. But they have all done a tremendous job of
getting up to speed with the challenges of the office and the
issues that we are facing and have been very, very loyal to the
office and to the mission and I have to say incredibly hard-
working. I suspect that some of them are eagerly anticipating
returning to their home agencies and not----
Mr. Watt. That is all right. Obviously, you are not going
to answer that question. [Laughter.]So I will just yield back.
My time has expired.
Ms. Espinel. I just need time to compliment the details.
Mr. Watt. I know they have done a great job, but--okay. All
right. I will let it go.
Mr. Goodlatte. I thank the gentleman.
I now yield to the other gentleman from North Carolina, the
Vice Chairman of the Subcommittee, Mr. Coble.
Mr. Coble. Thank you, Mr. Chairman, our neighbor to the
north. Thank you, Mr. Goodlatte.
Ms. Espinel, good to have you with us.
A key mission of the U.S. Customs and Border Patrol is to
target and seize imports of counterfeited and pirated goods.
From 2005 through 2008, there was a steady and dramatic
increase in both the number and yearly domestic value of
seizures, with the latter rising from $93 million to $273
million. In 2009, however, there was a drop in the number of
seizures and a 4 percent decline in the yearly domestic value
of seized goods, which you probably know.
Are you concerned about these declines and what do you
think accounts for them? What steps should or should have been
taken to get the Customs and Border Patrol back on the upward
swing?
Ms. Espinel. Thank you. So the value of imports did fall 4
percent in the year that you mentioned, although the value of
imports overall in that year declined by 25 percent because of
the economy.
Mr. Coble. What year was this?
Ms. Espinel. From fiscal year 2008 to fiscal year 2009. So
the proportional change in the value of IP was actually much
less, which I think indicates the priority that was put on
intellectual property seizures.
There have been declines in value also, though, from 2009
to 2010, even though the number of seizures has gone up. And I
think in that case, the decline in value can be attributed to a
change in counterfeiter tactics.
So just to explain that, two of the things the
counterfeiters are doing right now is they are splitting up
counterfeit goods and they are shipping them into the United
States in smaller packages. So that means the individual value
of seizures can fall. And they are doing this, obviously, to
try to evade Customs and make it even harder for Customs to
seize things.
Another thing that is happening and is happening
increasingly is that counterfeiters are essentially selling
direct to consumers. So instead of shipping large pallets
through Customs that then go to middlemen, they are shipping
small packages that go direct to consumers. This is a big
challenge that our Customs is facing, and not just U.S.
Customs. This is a challenge European customs, for example, is
facing as well.
So one of the things that we have been doing is working
with Customs to see what they need in terms of technology or
law enforcement tools, including legislative changes to help
them address this particular problem.
The one other thing, though, I would mention is that if you
look at this past year, seizures are up. In terms of the number
of seizures, seizures are up 34 percent, and I would highlight
that in terms of sort of critical areas that we are focusing on
like health and safety and technology, seizures are up 97
percent.
Mr. Coble. Thank you.
This Committee generally, and this Subcommittee
specifically, has been a strong advocate for the need to
improve the enforcement of intellectual property rights.
Indeed, the original PRO-IP bill that led to the creation of
your position, in fact, and required it to be placed within the
Executive Office of the President was introduced by our former
Chairman, Mr. Conyers, and our present Chairman, Mr. Smith.
Over time, the need to ensure that IP rights are respected and
enforced is only going to increase in my opinion, as is the
need to ensure our agencies are working efficiently and
effectively.
Let me put this question to you, Ms. Espinel. In your
opinion, what is the single most important thing that we
Members who care about strong IP rights can do to ensure your
office is provided with the resources, certainty, and
permanence needed to accomplish what we need to do for American
creators and innovators?
Ms. Espinel. Well, I would highlight two things, if that is
acceptable.
First, I would say in terms of our overall enforcement
efforts, while enforcement has increased over this past year
and I can assure you will continue to increase, I think are
areas where our law enforcement could use more tools. And so
one of the things that we would really like your help on is
working with us on legislative recommendations. And I realize
that we owe you the white paper on legislative recommendations
that we have been preparing, but hopefully we will have it to
you soon. And then we would very much like to work with you as
that moves forward.
And the second thing I would say is I think it is, as I
have mentioned, incredibly helpful to us to hear from Members
directly what their concerns are and to have you highlighting
the importance of this issue, which is very important to the
Administration, but we know it is very important to Congress as
well. Even though we know that, it is always helpful to hear
that directly. So hearings like this or other ways of
highlighting the importance of this issue are very helpful.
Mr. Coble. Thank you.
Mr. Chairman, I see my red light has illuminated. So I
yield back.
Mr. Goodlatte. I thank the gentleman.
And the Chair now recognizes the gentlewoman from
California, Ms. Lofgren, for 5 minutes.
Ms. Lofgren. Thank you, Mr. Chairman, and thanks for this
hearing. It is helpful to touch base on where we are.
I note that you have pledged to have transparent
policymaking and enforcement. And with that in mind, I would
like to understand better the recent domain name seizures by
ICE, the so-called Operation In Our Sites. I want to know how
ICE decided which websites to target, and I am also interested
in knowing whether there is an assessment when it is a
copyright case of whether there are affirmative defenses to
alleged infringement, for example, fair use, and whether a site
is in compliance with the Digital Millennium Copyright Act
takedown provisions is considered and whether there is a
consideration of whether taking down a site will involve
censorship of material that is protected under the First
Amendment.
For example, in the recent domain name seizures, there were
two hip-hop blogs called OnSMASH and RapGodFathers. I know that
from my staff, not from my own understanding of rap music.
[Laughter.]
And it is my understanding that the sites had no downloads.
They hosted no copyright material themselves. They were only
linked to other sites. In fact, one of the sites claimed--I
read this in the New York Times--that the labels themselves had
asked them to link to some of the material because they were an
influential fan site, and both sites claimed that they were
complying with the DMCA takedown provisions.
Now, I want to know whether you think it is appropriate for
ICE to seize the domain names of blogs such as this. Is that
really a priority for enforcement? And do you have concerns
about First Amendment implications when blogs such as this are
seized?
My understanding is that the top priorities under the act
are, first, health and safety, links to organized crime, large-
scale commercial counterfeiting and online commercial piracy
and trade secret thefts or economic espionage. How would this
operation fit with those priorities and how many--well, I guess
that is a lot of questions for you to answer.
Ms. Espinel. So, first, let me say I think copyright
enforcement, online enforcement, Internet piracy is a big
issue. It is a big issue for our economy, and I think it fits
well within the mandate that Congress gave me in the PRO-IP
Act.
I think in terms of Operation In Our Sites, as I have said
repeatedly, we think increased law enforcement has to be part
of what we are doing to try to battle rogue websites and the
online piracy and counterfeiting problem that we face with
other actions as well by the Administration and by the private
sector, but increased law enforcement needs to be part of that.
Operation In Our Sites is based on our seizure authority
and has the due process protections built into it that will go
along with any seizures.
Ms. Lofgren. Well, there aren't really any--I mean, they
have sued the Department and they have had to go to the expense
of getting lawyers to sue you. But there is no real due process
provisions.
Ms. Espinel. Well, actually before any seizure under
Operation In Our Sites is taken, the agents, working with the
prosecutors from DOJ, have to go to a magistrate judge to get a
showing of probable cause before they can take any action
against the website. And then, as you said, there is also the
ability to challenge the seizure after the case. That is the
due process that is built into our----
Ms. Lofgren. Well, with all due respect, I mean, judges
sign a lot of things. For example, the FreeDNS takedown. It
wasn't a copyright enforcement. It was supposedly a child
pornography enforcement. ICE took down 84,000 websites of small
business people that had nothing to do with child pornography
at all and put up a little banner saying this was taken down
for child pornography, really smearing. If I were them, I would
sue the Department. These were just small businesses. They had
nothing to do with anything. And yet, a judge signed that. So
if that is the protection, it is no protection.
I want to know what is the Department doing to think about
the affirmative defenses, to think about--yes, there is piracy
and all of us are united that we ought to do something about
piracy. But there is also a First Amendment that you should be
considering when you go and destroy a small business. Are you
thinking about that?
Ms. Espinel. Yes, we are definitely thinking about that.
I will go back to your question, but just to say for a
moment, I think one of the things that the United States--the
United States as a government--can do very effectively in the
space of online enforcement is take an approach--and we have,
we believe, a very well considered approach--that will serve as
an example to other countries. We are a government that really
cares about due process. We are a government that really cares
about the First Amendment, and I think what we do is an example
to other countries but I think a very positive example. And we
do consider all of those issues. We will continue to. And that
is one of the reasons I think it is so important for the United
States to be very active in this space.
You mentioned a case, an incident recently related to child
pornography. It is not an IP case, obviously, so I am not
familiar with the details, although I do know that ICE realized
that there was a problem quickly and moved quickly over the
weekend to rectify it. I understand, from talking to our law
enforcement, that there are safeguards in place in Operation In
Our Sites to avoid any similar type of mistake from happening.
And I guess I would just emphasize, as you also alluded to,
what our law enforcement wants to do is go after criminals.
That is what they do every day. They are incredibly dedicated
to that task and I think that is where the Administration is as
well.
Ms. Lofgren. I have a lot of other questions and perhaps--I
know we have an opportunity to submit them for the record.
But I will just say in closing that there is a lot of
large-scale commercial piracy that is going on, and the
Department is doing very little about it. I think that that is
something that needs attention. And some of the people who are
into copyright enforcement in Silicon Valley--Mr. Berman, there
are many of them--thought that--and I can't say what they said.
It was chicken poo in terms of the report they saw. They
thought it was small time and the big fish are getting away.
And I think that that needs some attention.
I will submit my further questions for the record.
I yield back.
Mr. Goodlatte. I thank the gentlewoman.
The gentleman from Utah, Mr. Chaffetz, is recognized for 5
minutes.
Mr. Chaffetz. Thank you.
I appreciate you being here. My understanding is part of
your responsibility is regarding domestic but also
international, and it is mostly that international aspect that
I would appreciate focusing on.
And Mr. Coble was getting at this, but help me understand
the metrics behind some of the numbers. You made a big point in
your written testimony and your verbal testimony about these
dramatic numbers and the increases that are happening with ICE
and the seizures and the arrests are up and the Department of
Homeland Security's seizures were up. Can you help me quantify
what those are? I worry sometimes when I hear just percentages.
I mean, are we going from 12 to 15 or are we going from 12,000
to--help me understand when you use these numbers, what actual
numbers are we talking about, not just percentages.
Ms. Espinel. I know, with respect to the DHS seizures, for
example, that are up 34 percent--well, my understanding is that
we are looking at an increase from 12,000 to about 16,000. I
think your overall point is are we sort of starting from zero
and therefore----
Mr. Chaffetz. Yes.
Ms. Espinel [continuing]. A dramatic increase is not really
an indication of that much action. But we are not. IP
enforcement has been a priority for the U.S. Government for
many years. I think we are starting from a solid base but
trying to increase dramatically from that.
Mr. Chaffetz. Can you help me quantify? How much of it do
you think you are actually getting to? I mean, it is like if we
were taking an analogy of people speeding down the freeway and
you say, well, we have been ticketing more often, but still
everybody is going 90 miles an hour. What percentage do you
think you are actually getting to when you are actually doing
these seizures and arrests and all that? How much more is
getting by us?
Ms. Espinel. I guess I would say this. One, we recognize
that even though seizures are up and even though cases are up,
there is a lot of infringement that we are not catching.
So let me give you two examples of----
Mr. Chaffetz. I guess the question is--because my time is
so short--do you have any metrics that actually quantify the
actual numbers? And if you do not have them right off the top
of your head, I understand that. I guess as a written response
perhaps as a follow-up that is what I would be interested in
because I think we are all united, both sides of the aisle
here, in making sure that we do have more enforcement. But it
is hard to quantify when you use just those percentages. And
they seem so dramatic. But I want to know much of it are we
missing.
Ms. Espinel. I think they are dramatic. We will get back to
you with the numbers behind the percentage increases.
I would, though, like to mention that in terms of--I mean,
one of the things that we are very conscious of is law
enforcement. By law enforcement, I mean DOJ and FBI and
Customs, and the agencies where you are seeing those law
enforcement statistics go up, that in many areas, including in
the online enforcement area, it is not possible for law
enforcement to, by itself, be able to deal with the scale of
the problem that we are facing. And so that is one of the
reasons that my office has been so focused on and why I have
mentioned repeatedly in this hearing that we really need to
have the private sector. We really need to have Internet
intermediaries working cooperatively with us on voluntary
solutions because without that, I think it is going to be much
more difficult for us to effectively address it.
Mr. Chaffetz. Yes, and there are a lot of distinct----
Ms. Espinel [continuing]. Go hand in hand.
Mr. Chaffetz. There are a lot of distinct problems and
challenges that I have with trying to make sure that these
people--their being a the law enforcement agency as well. And I
am very sympathetic to the challenges that that poses upon them
when the Administration, the law enforcement side, is not doing
their job. And I hate to put the onus on those individuals. But
that is another discussion.
You mentioned verbally--somebody had put their first IP
person in China. Do you recall that earlier in your testimony
talking about how many personnel we actually have?
Ms. Espinel. We have personnel that are overseas in China.
First of all, I was talking about law enforcement. For example,
PTO has had people that work on IP enforcement, among other
things, in China for many years. In terms of law enforcement,
we of course have law enforcement personnel stationed in China
who work on a variety of issues, including intellectual
property, but in terms of having law enforcement that is
essentially solely dedicated to intellectual property, ICE has
a solely dedicated person. They made the decision to do that in
September.
Mr. Chaffetz. One person.
Ms. Espinel. And the FBI is putting a person in place as
well, or they are at least seriously considering doing that.
Mr. Chaffetz. And, Chairman, I can see my time is running
up. But to think that we have one person in China who is solely
dedicated to this and now we are going to get two is a 100
percent increase. Wow, look at the great dedication. That is a
shockingly small number. I walked into this hearing not knowing
that number. It is absolutely stunning to me that we have so
little focus on that. Somehow we have 2.2 million Federal
employees and we only got two working in China on this issue. I
think it is laughable.
Thank you, Mr. Chairman. I yield back.
Mr. Goodlatte. I thank the gentleman.
The Chair now recognizes the gentleman from California, Mr.
Berman, for 5 minutes.
Mr. Berman. Thank you very much, Mr. Chairman.
Good to have you here, Ms. Espinel, again.
A couple of issues I wanted to try and raise with you. I
want to deal with sort of the change of distribution of piracy.
If one is using a search engine and type in the words ``free
Beatles mp3'' or ``free King Speech movie,'' that person will
be taken to unauthorized copies of those valuable works. If
they type in similar wording in blog postings, they may find
links to unauthorized copies of works and sponsored advertising
nearby. You have talked about the work on illegal pharmacies
and on dealing with searches for kid porn.
And there was an interesting article recently in the New
York Times about Google and searches involving J.C. Penney. I
would like to put that article in the record, if that is all
right. I ask unanimous consent to have that article from the
New York Times included in the record.
Mr. Goodlatte. Without objection.
[The information referred to follows:]

__________

Mr. Berman. Thank you.
Basically Google thought J.C. Penney was gaming the search
results and took action. The article said one moment J.C.
Penney was the most visible online destination for living room
furniture in the country. The next, it was essentially buried.
That suggests that Google can circumvent organic searches when
they want to, for example, as the article suggests, take manual
action. The same thing with respect to advertising provided
next to those unauthorized links.
Given your experience with the illegal pharmacies, doesn't
it stand to reason that they could take similar manual action
against criminal enterprises engaged in IP theft? Have you
spoken to any of these search engines or advertisers about
taking corrective action to prevent IP theft? And can you relay
whether Google is attempting to address this problem and how
and what next steps will be taken? And if you could do that in
a way that gives me a minute to ask one last question, I would
appreciate it.
Ms. Espinel. We are talking to a whole range of Internet
intermediaries, including Google, both in their capacity as an
advertiser, as you mentioned, as well as others that control
Internet advertising. And we have raised the issue of search
with them, and we will continue to do so. So I guess I would
just say----
Mr. Berman. And what do they say?
Ms. Espinel. And I don't want to speak for Google in terms
of what they are doing. I think it is fair to say that the
companies that we have talked to, you know, legitimate
companies, don't want bad actors in their systems. Different
companies have taken different approaches to how exactly they
address that. I feel, in the discussions that we are having
with a whole range of companies, that we are making progress,
but I think, frankly, it would be premature for me to tell you
at this point how those conversations are going to end because
they are still in process.
Mr. Berman. Okay.
On another point, not to respond now, but at some point I
would like a briefing, if I could get it, from your office on
what the Indonesian--sorry-- not Indonesia--Singapore.
Singapore is promulgating regulations with respect to licensing
of television shows that are exclusive. I would like to know
what we are doing, how those regulations would affect the
rights of copyright holders to sell their product.
And my last question. In PRO-IP, we have a sense of
Congress resolution focusing on criminal intellectual property
enforcement and really the value of a criminal prosecution,
both in terms of the justice it seeks for the illegal conduct
and the people perpetuating it, but also for a tremendous
deterrent value. There was recently an enormous copyright
judgment where the defendant who lost the judgment, SAP,
stipulated to all the facts, which constitute an intentional,
willful violation of copyrights on software. This is not for
your response. This seems like a classic case, but there are
probably other ones as well where a criminal enforcement
action, where the facts are clear and just out there, really
has benefits far beyond just that particular case but to all
those who might be contemplating doing that kind of stuff. And
I just think that that sense of Congress provision in the PRO-
IP Act is worth taking a look at and hopefully Justice is doing
that because they can play a very helpful role here on this.
And I thank you very much.
Ms. Espinel. Thank you very much.
Mr. Berman. I yield back.
Mr. Griffin [presiding]. I would like to just yield myself
5 minutes and ask a few questions, Ms. Espinel.
First and foremost, have you ever visited an overseas
military installation? I would assume maybe you have in
Afghanistan or Iraq. The reason I raise that is you will find,
if you go to just about any U.S. base or post in Iraq/
Afghanistan--you will see a lot of pirated materials
particularly DVD's and CD's but mostly DVD's, and I don't mean
five or six. I mean thousands and thousands. And I was just
wondering whether--I mean, it was that way when I was in Iraq
in 2006. I am wondering if you have ever had any sorts of
conversations with folks at DOD about that, why we allow that,
and if there is any conversation about that at all.
Ms. Espinel. Sure, I would be happy to. If I could just--I
was going to say something in response to your question. So if
I could just turn to Mr. Berman for a moment----
Mr. Griffin. Sure.
Ms. Espinel [continuing]. To say in terms of the sense of
Congress and the point you made about even a few criminal
actions having a deterrent effect that goes far beyond the
number of those actions, I completely agree with you.
And I would also say in terms of the level of priority that
DOJ has put on this issue of IP enforcement, I know that it is
a priority issue for Attorney General Holder. It is something
he is very focused on. He has made that very clear to DOJ and
the FBI. So I am happy to take back to them concerns about
criminal copyright enforcement, but I also just want to assure
you that I think he personally and his staff take this issue
very seriously.
In terms of the military bases, I have only been on one
military base installation in the past year. And for whatever
reason, the problem that you mentioned was not actually in
evidence in that particular military base, but I believe you
that it exists. And in fact, we have heard concerns about this
before. As I think I mentioned, one of the first sort of
overarching principle we had in the strategy that we issued for
the Administration is that the United States needs to protect
intellectual property in what we do to serve as an example to
other governments and to our citizens, and we take that very
seriously. We have heard this concern and we are actually
discussing with the Department of State what can be done about
it.
Mr. Griffin. And I would point out that there is a
distinction to be made between, say, a U.S. military base in
Germany, for example, where I know of nothing like this going
on. I am primarily talking about Iraq and Afghanistan where on
post you will have a PX where you can go in and buy all the
legitimate DVD's, and then about 100 yards right down the road
there will be a little office--I mean, an office or a store
where you can just--even if it is a tiny storefront with just
stacks of what would be illegal DVD's in the United States. If
you could take a look at that, I would appreciate it.
I think I have got a little more time here. I would like to
ask you about Russia. And we hear a lot about China in the
context of pirated materials, but I would be interested to hear
your take on Russia and whether, based on your work, you
believe--what level of respect they have for the rule of law in
this area, whether we are making any progress with regard to
Russia or is it possible that we are sort of putting our
differences with Russia on these issues--maybe we are putting
them aside and emphasizing what we may consider more important
concerns. Could you comment on that?
Ms. Espinel. Sure, I would be happy to.
You know, I think with respect to Russia, clearly IP
enforcement is a big issue there. You asked whether or not we
have made any progress. I think Russia has recently passed a
few pieces of legislation that I think are significant and are
helpful.
But in terms of enforcement, they still have a big problem.
And in my experience, in terms of Internet, in particular, they
have a problem. They have become sort of a safe haven in many
cases for websites that are distributing illegal products into
the United States and around the world. So that is a big issue
for us. That has been a priority focus for the WTO accession
negotiations, and we have made clear to Russia that we need to
make progress there.
I guess the only other thing that I would mention is that
the Vice President is going to be traveling in March to Russia.
Vice President Biden cares deeply about intellectual property
enforcement. He has for many years. And I have discussed this
issue and I am confident that he will raise it when he is in
Russia. It is something that he cares about a great deal.
Mr. Griffin. Great. Thank you.
Who do we have next? Ms. Chu, you have 5 minutes.
Ms. Chu. Thank you, Mr. Chair.
I have questions about international infringement. I know
that the U.S. Government, through your work and the work of the
USTR and the work of other agencies, is doing much to press our
trading partners to respect intellectual property rights. To
use a recent example, yesterday the Office of the United States
Trade Representative released the Out-of-Cycle Review of
Notorious Markets spotlighting more than 30 Internet and
physical markets that exemplify key challenges in the global
struggle against piracy and counterfeiting. It identifies these
very, very blatant sites, the physical markets that range from
Argentina to Ukraine and Internet sites such as Baidu of China,
the vKontakte of Russia, to Canada's IsoHunt and Sweden's
ThePirateBay. And there they are identified just blatantly.
I am wondering what actions you are going to take since
they are listed just right there.
Ms. Espinel. Thank you for raising that.
So as you mentioned, USTR just yesterday issued its report
on notorious markets that includes both physical markets but
also the online markets that you mentioned. I think that this
report, which is part of the Administration's strategy to put
out this report, essentially highlighting or naming and shaming
particular websites will be useful to us partly to help guide
our diplomatic efforts and make sure that our diplomatic
agencies are coordinated in raising concerns with other
governments. I think in terms of public awareness and raising
public awareness about the dangers of counterfeiting and piracy
and where those dangers might be found, this report will be
very useful.
Ultimately, we need foreign law enforcement to do more, and
so this report is only part of our efforts to try to get
foreign law enforcement to take action against sites that are
trafficking and infringing products. U.S. law enforcement is
obviously limited in terms of what it can do with respect to
overseas markets or overseas online markets, but I think the
USTR report will, hopefully, help raise awareness of that and,
as I said, is part of our overall strategy to try to get
foreign law enforcement to take more action here.
Ms. Chu. Now, since certain sites have been identified,
should they be accessible in the U.S.? If we are asking other
countries to enforce against those sites, shouldn't we be
willing to cut off those sites to the U.S. market?
Ms. Espinel. Well, first of all, I think the question of
cutting off sites to the U.S. markets with respect to any
particular site is a complicated one and a tricky one. That
said, I think you just sort of honed in on something that we
think is very important, which is even with these foreign
websites, to the extent they have access to U.S. consumers and
to the extent there are things that we can do to try to limit
the market, including the U.S. market, for foreign websites, we
think that would be very helpful.
In other words, even if we can't ultimately eliminate a
website or take a website down that is based overseas because
we don't have a jurisdictional reach, if we can do things to
try to reduce its ability to reach into the United States and
get products to our own consumers, we think that could be
enormously helpful and we are trying to work on that in a
number of ways, including with respect to getting the Internet
intermediaries to take more voluntary actions. So I think that
is very important.
Ms. Chu. Are you talking about only voluntary actions or
anything more forceful?
Ms. Espinel. Well, I think, again, you are talking about
foreign sites. So our law enforcement is limited in terms of
what they can do. And there may be legislative fixes that would
give our law enforcement more additional authorities, and we
would like to work closely with Congress on any ideas that they
have for legislative fixes.
But I think assuming the legal regime exists as it is
today, two things that we can do: one, try to encourage the
private sector to take steps to reduce the reach to U.S.
consumers and to try to encourage foreign law enforcement to
take responsibility for its sites or for activity that is going
on within their borders and to take action.
Ms. Chu. Well, let me try this question. President Hu's
visit provided an opportunity for President Obama to emphasize
the importance of IP protection to the U.S. He raised this
concern by noting that Microsoft estimates that only 1 in 10
users of Microsoft products in China actually pay for the legal
copies. If American companies are going to compete in the
global marketplace, we truly have to address this problem.
So based on your experience, what more can the U.S. do to
promote intellectual property enforcement in China?
Ms. Espinel. As you mentioned, during President Hu Jintao's
visit, President Obama had the opportunity and took the
opportunity to raise the need for better enforcement by China
repeatedly and forcefully with China. China has also heard in
recent months the level of concern from senior Administration
officials across the Administration. Secretary Geithner,
Secretary Locke, Attorney General Holder, and others have all
raised this.
There are a number of things that I think that we can do to
try to improve the situation in China. Ultimately, though,
China needs to take action for itself. Attorney General Holder
and ICE Director Morton traveled to China in the last 6 months
to press their counterparts for the need to do more directly.
It is actually the first time an ICE director has ever gone to
China.
In addition to that, while the numbers may not be
impressive to everyone, trying to get IP personnel, law
enforcement personnel placed in China--part of the reason that
we want to do that is because having personnel there on the
ground can help build the relationships with foreign law
enforcement that we need in order to get them to take action.
Beyond that, the JCCP and the SED and President Hu Jintao's
visit, probably most importantly, was an opportunity--and we
took that opportunity--to have China make commitments with
respect to the software problem that you mentioned with respect
to not tying its innovation policies to procurement
preferences, which is a very important issue. And so one of the
things that we need to do as a Government is follow up and make
sure that China follows through on those commitments.
Ms. Chu. Thank you. I yield back.
Mrs. Adams [presiding]. Thank you.
The gentleman from Arizona, Mr. Quayle, for 5 minutes.
Mr. Quayle. Thank you, Madam Chairman.
Thank you, Ms. Espinel.
I want to go back to the penalty disparity between
streaming and downloading illegally. And I know that you are
going to have a white paper and I really look forward to
reading that. But if you could give me kind of just the bird's
eye view or the Cliff Notes version of what do you think is the
correct solution to solve this. Is it just simply making it so
illegal streaming of copyrighted material is now a felony or is
it something else that we can kind of get behind? Because it
doesn't seem like that big of a--not a difficult task to
actually improve that part of the enforcement provisions.
Ms. Espinel. Well, far be it for me to comment on what is
difficult legislatively and not to accomplish.
I do think having infringement not clearly identified as a
felony does hamper our enforcement efforts in terms of the
types of cases that prosecutors are going to focus on in terms
of the types of penalties that are going to be assessed for
that activity. So I think that is a significant issue that we
are considering and, again, hope to have a recommendation to
you on that very soon.
Assuming that we and you are in agreement that it makes
sense to fix this deficiency, then obviously we then need to
have law enforcement take advantage of that and start bringing
the cases. So I don't know if that is what you were alluding
to. That would clearly be part of it or that clearly sort of
the end result here is to get more law enforcement action. But
I think one of the things we are seriously considering is
whether or not this legislative fix would help our law
enforcement be able to do that.
Mr. Quayle. And also previously in your testimony, you were
talking about how the private sector has been helping you,
especially with pharmaceutical infringements on the Internet.
What role do you see the private sector helping you in really
reducing IP Internet theft going forward?
Ms. Espinel. I think they could be helpful in a number of
ways, and we are having discussions with, again, various types
of Internet intermediaries about a whole range of IP
infringement issues, including copyright issues, trademark
issues. I think voluntary cooperation has the potential to
dramatically change things because I think Internet
intermediaries have the ability to stop infringement from
taking place. Now, it is very important to us as an
Administration that whatever voluntary solutions are worked
out, that they work, that they be practical and efficient, that
they not be unduly burdensome, and that they bear in mind
policy principles, even though they are taken by the private
sector, that are very important to this Administration and to
Congress such as due process and privacy and other issues. But
we think there is enormous potential there if the private
sector, if Internet intermediaries step up and take more action
to dramatically reduce online infringement.
Mr. Quayle. And this is going to be my final.
In 2008, Congress passed the PRO-IP Act which established
your position, and it also authorized appropriations for the
Department of Justice. Congress then provided increased
appropriations to the FBI to combat counterfeiting and IP
theft. In particular, the FBI created 31 IP-dedicated agents in
fiscal year 2009, an additional 20 IP-dedicated agents in
fiscal year 2010. The DOJ also assigned 97 assistant U.S.
attorneys to work with CHIP units, with all CHIP units having
two or more attorneys assigned to it.
However, a recent GAO study stated that along with reports
from FBI and DOJ, pursuant to PRO-IP, indicate that there has
not been a corresponding increase in IP investigations by these
agents. I think this is kind of a concern because Congress was
very specific and couldn't have been clearer with their
mandate.
What corrective actions have you taken to address this
issue?
Ms. Espinel. So the FBI had all of their new agents, the
agents that you referred to, hired, trained, and on the ground
as of the end of this year. They have been sort of coming in
throughout the year, but they were all on the ground as of the
end of this year. Obviously, my office doesn't get involved in
specific prosecutions or specific enforcement cases, but we
have been talking to the FBI and DOJ about their game plan
overall to try to use those agents as effectively as possible
and see increased enforcement actions coming out of them.
One of the things that they have done over the last few
months is set up--and I am probably going to forget the
technical term they use for them, but essentially set up sort
of regional task forces or working groups with the new FBI
agents that are on the ground in some of the key cities to make
sure that those FBI agents are both working with the other
Federal law enforcement that are already on the ground and on
State and local law enforcement to try to multiply the effect
that they have.
It is going to take some time, I think, to see prosecuted
cases because it takes time to investigate cases and develop
them. But one thing that we know has happened over the last
year, which I think is a good indicator of where this is going,
is that the number of cases that have been opened by the FBI
over the past year has increased dramatically. Now, those
opened investigations haven't yet turned into prosecuted cases
because that will take some time, and obviously, let me assure
you this issue of how those resources are being spent is one
that is of great importance to my office. So we will continue
to work with the FBI and DOJ generally on the overall game plan
for enforcement.
Mr. Quayle. So you think that as the FBI agents become more
familiar with various counterfeiting agencies that are out
there, then the actual efficiency of bringing people to
prosecution, to trial will actually be increased in the next
couple years?
Ms. Espinel. I do.
Mr. Quayle. Thank you.
Mrs. Adams. The Chair recognizes the gentleman from
Florida, Mr. Deutch, for 5 minutes.
Mr. Deutch. Thank you, Madam Chair.
Ms. Espinel, thank you for being here, and I think the
accolades you have been receiving are well deserved.
I would like to circle back to Operation In Our Sites
again. I discussed the operation with John Morton when he
appeared before the Foreign Affairs Committee last year, and I
appreciate the way that ICE took initiative and found ways to
tackle the problem within their existing authority. I believe
that he and his team deserve recognition for innovative and
aggressive action to stop theft and for doing so, I also
believe, with appropriate caution and discretion.
Millions of people have visited the site since the seizure,
have seen the seizure notices. And so I asked my staff to
investigate whether Operation In Our Sites was impacting the
online environment. And I learned something interesting that I
would like you to address.
One well known music video website that for years had been
the source of leaks, making videos available illegally before
they hit the legitimate marketplace, has apparently modified
its behavior since the ICE seizures. The owner had a successful
advertising-based business. They did not want to see that
jeopardized. So they reached out to the music industry how to
figure out how to clean up his act, and they took remedial
action. They continue to operate now legitimately after having
consulted with industry.
I wonder if there is other evidence of the deterrent effect
of increased Federal IP law enforcement like that that you are
aware of.
Ms. Espinel. So one of the things that I would point to,
which you alluded to, in terms of the overall deterrent effect
is the number of visitors that have gone to the sites and have
seen banners saying that the U.S. Government, the DOJ, and ICE
have taken action--I think over 36 million citizens have seen
those banners at this point, and I think that sends a very
powerful signal and hopefully acts as a deterrent as well that
this is a crime that this Administration takes seriously and
that it is not activity that people should be engaging in.
Beyond that, I also understand from law enforcement that
there are a number of sites that have voluntarily essentially
taken themselves down because of Operation In Our Sites. And I
think that is a great example of the type of deterrent effect
that you and that Mr. Berman referred to that can go beyond the
enforcement actions that are taken.
Mr. Deutch. Thanks.
I wanted to broaden the discussion a bit. All of the
discussion about online music, stolen music, and stolen film
and stolen books--the discussion always seems to focus on the
Internet intermediaries and what role the ISP's have in all of
this. I would like us to focus specifically, though, on
something else.
These entrepreneurs who deal in stolen music and deal in
stolen film start these websites in other countries not because
they think they are providing a great service to the youth of
our country who may choose to go to their sites and partake in
this stolen intellectual property. They do it to make money.
And if you could speak to conversations that you may have had,
your ongoing discussions, with the credit card companies whose
business is crucial to the success of these sites or to either
the advertisers directly or those advertising firms whose
business is to get eyeballs. They know that they will get
eyeballs on these sites, so this is what they pursue. Can you
tell us about the interaction you have had with those groups?
Ms. Espinel. Sure, I would be happy to and also hope to be
in a position to come back to you with more details on that
soon.
So we have talked to a number of the credit card companies
and other payment processors such as PayPal about steps that
they can take to stop processing transactions from sites that
are engaged in exactly in the kind of activity you are talking
about, you know, infringement as a money-making venture,
infringement as a business. I think those discussions are going
well. Some of the companies in particular have sort of stepped
up and said that they want to do more. I think all the credit
card companies that we have talked to are seriously considering
what more they can do. And we sort of very intensely engaged in
those discussions and hope, in fact, to within a very short
time frame be able to report on more specifics. But it is
something that we are pushing very intensely.
The other source of revenue that you mentioned is ads. I
think that is also a very important one and consistent with our
overall approach. So we have been talking to a number of ad
brokers. We have been talking to some of the companies that
advertise, legitimate companies that advertise on the Internet
but find their ads ending up on pirate sites where they don't
want them to be. We are actually convening a meeting later this
week with a number of companies that have ad networks on the
Internet to see whether or not there is more that they can do.
So I would be happy to come back to you on those discussions as
they move forward, but it is something that we are actively
working on.
Mr. Deutch. Thank you, Ms. Espinel.
I will yield back.
Mrs. Adams. Thank you.
The Chair recognizes myself for 5 minutes.
You mentioned in your testimony that part of the Joint
Strategic Plan on Intellectual Property Enforcement--one of the
priorities is make sure that the U.S. does not purchase or use
infringing products. Can you elaborate on the specific steps
you are taking or have taken?
Ms. Espinel. Yes, I would be happy to.
So in January we issued a statement that went out to all
the Federal procurement officers of the U.S. Government setting
out the Administration's policy in two areas: one, for us to be
technology neutral in our procurement but also reminding the
Federal agencies that all technology has to be properly
licensed. So that is something that we already did and is
publicly available.
There are at least two other issues in this area that we
are actually working on. I will mention them briefly.
One is with respect to our contractors, the Federal
contractors, and the software that they use. One of the things
that we committed to do and will do is review our policies with
respect to Federal contractors that use software. It is very
important to us that those--not just the U.S. Government but
those who are doing business with the U.S. Government also
respect intellectual property. And we hope to have that review
done shortly.
And then the second issue I would mention, which I think is
one of critical importance, is we have a problem with
counterfeit goods entering the U.S. supply chain across all
agencies. In our view, that is a particularly critical problem
when you are talking about the Department of Defense, NASA, our
military, and our critical infrastructure. So we have been
working very intensely with DOD and NASA on a number of
recommendations to try to address that problem. I think we are
still in the middle of that process but I think it is safe to
say that that is probably going to be some combination of
policy changes, possibly regulatory changes, and I dare say
legislative changes that we would like to work with Congress
on. It is an extremely complicated issue, but we hope to have a
set of recommendations to you within the year certainly and
hopefully as soon as we can.
Mrs. Adams. I am going to go back to a question you had
earlier, and I want you to, if at all possible, just answer yes
or no, just make it that easy. Details. Are they more
efficient, more effective? Yes or no?
Ms. Espinel. It is a very difficult question to answer yes
or no.
Mrs. Adams. That is what I am looking for. You prefer not
to answer it?
Ms. Espinel. Yes. I mean, I think it is difficult to say
that details are more efficient.
Mrs. Adams. So they would be less efficient and less
effective.
Ms. Espinel. I think what is important, you know, at this
point we have the budget we have, and we and the team of
details have been tremendous in trying to work with what we
have and----
Mrs. Adams. I understand. I listened to you earlier. I was
trying to get to the core of it. As you know--and I think you
understand where I am going with this. So would it be your
opinion that details are less effective, less efficient. Yes or
no.
Ms. Espinel. I think it is difficult for me to answer that
question.
Mrs. Adams. Okay.
The Chair recognizes the gentlelady from Florida, Ms.
Wasserman Schultz, for 5 minutes.
Ms. Wasserman Schultz. Thank you to the gentlelady from
Florida.
Ms. Espinel, it has been really interesting and helpful to
listen to your testimony and your answers to questions.
I appreciate the fact that you have been able to help work
with companies like MasterCard, American Express, which is a
constituent company in my district, on not enabling pirate
websites by helping to make sure that those companies no longer
process transactions on those sites. So I am glad to hear that
some of those businesses are beginning to do their part.
But I want to go back to rogue websites that Mr. Berman
talked about earlier because many of those get their primary
source of revenue from advertising. I want to ask unanimous
consent, Madam Chair, to admit these two screen shots to the
record.
Mrs. Adams. Without objection.
[The information referred to follows:]

__________
Ms. Wasserman Schultz. Thank you very much.
Many people assume that these rogue websites are
legitimate. There are blue chip companies that are advertising
on them. They are advertising. Those advertisements appear
right next to supposedly free content.
This screen shot right here from the website buzznet offers
free downloading of the movie ``Hall Pass,'' which just came
out this weekend and is only in theaters right now. General
Electric and punchbowl are the advertisements that are right on
this website. I don't think GE or punchbowl have asked to have
their ads put on websites that promote illegal content.
And then this other screen shot is from the blogspot site.
It also is promoting free live streaming of ``Hall Pass.'' It
has a series of ads by Google on it. I understand that Google
owns blogspot. So perhaps there is an inference to be made that
Google, by putting its own ads on a site that it owns with
clearly infringing materials, is facilitating this conduct.
On the same blogspot web page, there is also an ad for
Starwood Hotels, another blue chip company. I don't think
Starwood asked to have their advertisement listed on a site
with illegal content.
I mean, there are two significant problems. There are more,
but significant ones include that--I mean, online advertising
is making piracy profitable, and that is a huge problem. And
online advertising makes piracy seem falsely legitimate. Those
are two huge problems.
I would like a little more detail in your answer than you
gave to Mr. Berman. What can be done to make the online
advertising marketplace safe for companies that want to be good
corporate citizens? They are not asking to have their ads
placed on these sites, and they are accidentally promoting
piracy as a result.
Ms. Espinel. First, let me just say I think you set out the
problem exactly, and we are in complete agreement. I think
there are two separate problems with advertising. One is that
it makes sites appear legitimate when they are not legitimate.
And I have, in fact, had members of the public say, oh, well,
this site--look, there are ads on it from, you know, X large,
legitimate--you know, X company. Therefore it must be legal.
And we all know that that is not true, but it is not surprising
that the public might have that reaction. So in terms of
helping these sites obtain legitimacy and confuse the public,
that is an enormous problem, and it is also an enormous problem
because it is a source of revenue. So it allows these sites to
exist and to keep running.
In my view--just my view--I think there are sort of two
different angles that we come at to try to address this
problem. Part of that is working with the ad networks, so
working with the companies that place these ads on the sites,
and seeing if there is more that can be done to make sure that
ads aren't placed on illegal sites. And part of it is working
with the advertisers. So working with the big companies that
you named who I don't believe--and certainly in our discussions
that we have already started having with them don't want their
ads on these sites and seeing if there is more that they can do
to make sure that their ads aren't, in fact, placed on these
sites.
So I think it is enormously important, and we are having
both of those discussions in parallel because I think one of
those alone might address it, but we are going to try to attack
this on as many fronts as we can, and we hope to be able to
make progress on that over the next few months.
Ms. Wasserman Schultz. Thank you. And I would think that
there would be a way, a mechanism that you could establish or
that you could negotiate that could be established where there
could be more of a review before ads are placed because it
doesn't appear--there couldn't possibly be one that exists now
or there wouldn't be as many legitimate ads on illegal sites or
sites promoting illegal content.
Ms. Espinel. Yes. I mean, this is not to say we don't think
something can be done. But I do want to emphasize it is
technologically complicated, and just because it is
technologically complicated doesn't mean it can't be
accomplished. But there are, as I understand, literally
billions of these ads being placed every day because of the way
e-commerce works. So it is not a simple endeavor but I think
there is more that can be done and we are working with the
companies that we think could help us to see how we can do that
in a practical and efficient way.
Ms. Wasserman Schultz. Thank you. I know my time has
expired and I won't ask the question on the record. But I would
like to talk to you about the whole issue of taking down sites
with illegal content and the time frame that sites like Google
utilize. I mean, there is far too lengthy a period of time and
a frustrating process in terms of their responsiveness, not
just Google, but others. So if we could have an opportunity to
talk about that, that would be helpful. Thank you.
Thank you. I yield back.
Mr. Goodlatte [presiding]. I thank the gentlewoman.
And it is now my pleasure to recognize the Chairman of the
Government Oversight and Reform Committee, the gentleman from
California, Mr. Issa.
Mr. Issa. Thank you, Mr. Chairman.
Ma'am, it has been helpful to wait and listen to some of
these others. I came in a little late.
I have got a number of questions. Some of them will be deja
vu because they have already been asked.
Ms. Chu of California had asked you about sort of the
domestic versus overseas, and you didn't really answer the
question.
So you have been on the clock for a year and 3 months. You
have got a year and 11 months left until the President's term
is over presumably. Unless there is an extension by him or his
successor, you don't have another term. So you are getting
closer to halfway through.
And if I understood correctly--and correct me if I am wrong
on any of these--Congress gave you significant new resources in
both FBI and U.S. attorneys and the best answer you could give
was we have opened more cases but there is a delay in
prosecution. So you have to wait on that.
It seems like 2 years after that new authority and the
ramping up of these individuals--they didn't come like fresh
out of grammar school. They came as FBI agents with prior
experience. They came as U.S. attorneys that did not just get
their law degree yesterday.
First of all, why is it that you can't show us positive
results after 2 years and hundreds of millions of dollars
invested, if you know?
Ms. Espinel. So, first of all, I want to clarify something.
I didn't mean to say or imply that there had been a delay in
prosecutions. I don't think there has been any delay.
Mr. Issa. No, it wasn't a question of delay though. But you
had said, look, they have opened more cases, but it is going to
take time to get to where that turns into prosecutions. The
Congress invested 2 years ago substantially. It has ramped up.
These are not brand new people. An assistant U.S. attorney is
supposed to arrive day 1 as a qualified prosecutor or they
don't get the job. It's not a beginner's position.
So my question to you is why is it Congress should not be
impatient that not enough is happening and that it appears as
though the status quo of we are forming nexuses, we are
leveraging more individuals, we are trying to get more for our
money, when in fact you have 2 years under your oversight--not
your command, but your oversight--that we are not getting it.
Do you have an answer to that question?
Ms. Espinel. So what I want to clarify in terms of the
timing is that the FBI agents that were put in place were all
in place as of the end of this year. So they have not been in
place for 2 years. They have been----
Mr. Issa. You said 31 and 20. You had 31 for more than a
year, 20 as of the end of the year. 31 FBI agents on board for
more than a year and you are not coming to us with tangible
results.
I will move on and let you answer for the record, and if
you don't mind, I will submit a detailed question for the
record as to that.
Getting past opened cases, there was a question from the
gentlelady from Florida, if I understood it correctly--and it
is an extremely good question that we are interested on both
sides of aisle. Within your oversight of what should be done,
you said you don't have jurisdiction overseas, and yet if there
is a legitimate U.S. ad being placed on a banner of a pirater,
there is a conduit benefit. There is a benefit to that
advertiser in that if they get ads, any revenue, anything at
all, they have benefitted from piracy. They are a willing
participant in piracy because the reason that ad got a hit is
because somebody went to the pirated space.
Have you explored and/or begun any possible prosecution of
people who advertise and thus make piracy profitable? It is not
hard. You don't need new jurisdiction, as far as I know--new
authority. There are laws on the books that would allow that
prosecution at least to be attempted. Have you looked into it?
Ms. Espinel. I should speak to DOJ before answering that
question because there may be pending investigations I would
not be aware of.
Mr. Issa. The question really was simple. Have you looked
into it?
Ms. Espinel. But what my office has been looking into is
working with the advertisers to try to have them pull those ads
off of the sites so that sites are not using them as a viable--
--
Mr. Issa. Ma'am, your position was created to make a
difference. If you are negotiating with people who are willing
participants and are gaining from criminal activity, that you
agree is criminal activity but you are telling us is outside
your reach, then in fact you are talking to the enablers and
telling them to quit enabling. Well, you are not going after
them as, in fact, criminals in that process because they are,
in fact, participants and benefitting. Have you explored that
theory in the 1 year and 3 months you have been on the job?
Ms. Espinel. Well, we think there is a great deal of
potential in talking to advertisers or talking to these
companies and seeing what they will do on their own. That said,
our overall goal is to reduce infringement. So if that approach
doesn't work, we will, of course, consider other approaches,
including possible legislative approaches.
Mr. Issa. I keep hearing about legislation, but if you
don't prosecute credit card companies who are participants and
knowingly participating in this, then you are missing an avenue
if you are not at least trying it. If you don't go after the
profits from ads, then you are not trying.
And on top of that, I will add one more for the record that
I'm sure you haven't looked at. If the FCC can come out and say
that they can enforce net neutrality because they have
authority over the Internet, then the FCC has an absolute right
to deal with whether access into our country occurs by these
transmissions, if you will, of material which is illegal,
unauthorized, and inappropriate. Will you please commit to at
least talk to the FCC and look at whether or not their
relationship with ISP's that they now have asserted control
could, in fact, bring a difference to this on your remaining 1
year and 11 months?
I thank the gentleman and yield back.
Mr. Goodlatte. I thank the gentleman.
And I now recognize the gentlewoman from Texas, Ms. Jackson
Lee.
Ms. Jackson Lee. Thank you very much.
Mr. Goodlatte. We have 10 and a half minutes remaining in
the vote.
Ms. Jackson Lee. Thank you, Mr. Chairman.
I have a different opinion. I think it is almost night and
day for the work that you have been able to do over the last,
say, 8 years as we look back on a previous Administration.
So let me try and expand what you are doing. I think it is
important to note I am looking at the spotlight here, and I see
more a blueprint that talks about the various initiatives that
you have had. So I am going just allow you to take these two
questions. I don't want to recount all that you have done. I am
probably going to want to have maybe a one-on-one meeting with
you to be able to address some particular issues.
But there are a lot of countries in South Asia and
throughout Asia, if you will, that have unfortunately been
notorious on taking intellectual property, particularly
software and other hard goods, if you will. Can you give me
specifically what you think under your leadership and the Obama
administration and the authority that we have given you in
Congress that you have actually done to be able to impact on
that? And forgive me if you have said it, but I want to hear it
again.
And the last point I want to ask you is the question about
this whole issue of jobs. I think intellectual property theft
is directly connected to American jobs, and I am ravaged about
the jobs lost because of intellectual property violations and I
am interested in your Administration and Mr. Obama's
administration, the President's administration, being called,
if you would like to say it, ``wild dogs'' on this issue. So my
question is how many jobs would you estimate would be created
in the United States in the next year if the Office of
Intellectual Property Enforcement Coordinator is successful in
achieve the Joint Strategic Plan and in thwarting
counterfeiting activities? And do you have job creation in your
mind as you do your job?
Ms. Espinel. I have job creation in my mind every day. I
had job creation in my mind before I took this job. I think
that was the issue I most want to focus on in terms of sort of
my own personal success that comes out of this job. I think if
I leave this job feeling like I saved someone from losing their
job and hopefully create more jobs for the American people, I
will feel like this was a success. That is enormously important
to what we do every day.
You asked a question about data and the number of jobs that
are going to be created. That is an excellent question. It is
not something the U.S. Government has looked at before, but it
is actually one of the things that my office is doing with the
Department of Commerce and with a whole group of chief
economists from across the Administration. We are working on
what will be the first U.S. Government economic analysis of the
number of jobs and the number of exports that are created by
our IP industries across our entire economy. And I think that
will be enormously helpful to us as we are moving forward with
policy decisions.
But job creation is one of the absolute top priorities that
we have. Increasing exports is also a big priority, but that
feeds right back into job creation, as you know. In general,
innovation is incredibly important to our economy. Without IP
enforcement, we will lose our innovation unfairly to
competitors overseas. So that is in our mind every day.
Mr. Chabot. Would the gentlelady yield for just one moment?
Just very brief.
Ms. Jackson Lee. I will yield to the gentleman.
Mr. Chabot. Thank you for yielding.
I would ask the Chairman if I could ask a question in
writing and ask for the response in writing.
Mr. Goodlatte. Yes. We will provide for all Members to
submit questions in writing within 5 days, 5 days legislative
days.
Mr. Chabot. Thank you and I thank the gentlelady.
Ms. Jackson Lee. My pleasure.
May I quickly just--you know that--well, let me just say I
am a believer that the genius of America is founded in small
businesses and minority businesses. They invent things. Do you
have a focus in your office? And they are hurt the most. They
have no big lawyers when their intellectual property is co-
opted. Do you have a strong emphasis on protecting those little
ones who don't have the resources to protect themselves who
create major jobs in the United States? Minority, small
businesses, women-owned businesses.
Ms. Espinel. I was just going to say small businesses not
only create ideas but they also create our jobs. So they are a
big focus for us.
One of the concerns I have is that as we are pushing to
increase exports from our small businesses in overseas markets,
which is very important and we want to do that, but we also
don't want our small businesses to end up in markets where they
are not protected and they don't have the resources or the
experience that some other companies do to try to protect them.
So one of the things that we are doing with the Department of
Commerce is to see if there are new and innovative ways that
our Government can help our businesses so they know when they
are in those overseas markets that we are 100 percent behind
them and are supporting them. We don't want to put them in a
position where the jobs that they create and the exports that
they are trying to increase are in danger because of IP
infringement.
Ms. Jackson Lee. Let me thank the Chairman and the Ranking
Member.
Your enforcement is imperative to create and save jobs in
the United States of America. Let me thank you for your
service.
I yield back.
Mr. Goodlatte. I thank the gentlewoman.
And I would like to thank our witness, Ms. Espinel, for
enduring a good battery of questions here, and we are going to
have some more headed your way too as we will submit some to
you in writing.
Without objection, all Members will have 5 legislative days
to submit to the Chair additional written questions for the
witness which we will forward and ask the witness to respond to
as promptly as she can so that her answers may be made a part
of the record.
Without objection, all Members will have 5 legislative days
to submit any additional materials for inclusion in the record.
And with that, again I thank Ms. Espinel and the Members of
the Committee, and this hearing is adjourned.
[Whereupon, at 3:52 p.m., the Subcommittee was adjourned.]

A P P E N D I X

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Material Submitted for the Hearing Record

Response to Post-Hearing Questions from the Honorable Victoria A.
Espinel, U.S. Intellectual Property Enforcement Coordinator, Executive
Office of the President